Banks, Ex-S&L French Banks – French Retail: April data is out

In France, COVID-19 impacted loan growth in April with loans to individuals slowing & loans to non-financial corporates accelerating. Households are holding more cash & deposits at the banks while house/consumer loans are down vs. March.

15 Jun 2020

The COVID 19 outbreak impacted loan growth in April (yoy loan growth) with loans to individual slowing down and loans to non-fiancial corporates accelerating

Source: Banque de France

This line graph shows loan growth in consumer credit, house loans, and corporates from April 2017 to April 2020.

Strong deposit growth, loan production concentrated on corporates

Households are holding more cash and deposits at the banks (+EUR 27bn in April) while house and consumer loans are slightly down compared with March. Indeed, all commercial efforts were largely focused on corporate lending / state-guaranteed loans that month. There were even net outflows in life insurance in April. Banks underwrote EUR25bn more corporate loans in April when compared with March (+EUR60bn grouping March and April together). In April, corporates could rely on market funding (up +EUR33bn after -EUR2.4bn in March). Hence in total corporate debt rose EUR59bn (EUR90bn for March and April together). These amounts are very similar to the rise in corporate sight deposits (up EUR45bn in April / EUR85bn for March and April).

France has one of the highest take up of state-guaranteed loans

The French government-backed loan mechanism was launched on 25 March. As of June 5, businesses and professionals whose economic activity has been affected by the coronavirus epidemic and the lockdown period submitted c.500,000 applications for close to EUR112 billion, one of the highest take up in Europe. C.90% of the applications for government-backed loans came from very small enterprises (VSEs). VSEs represented 41% compared with 34% for SMEs, 10% for intermediate and 12% for large corporates. Refusal rate is low at just 2.5%. Wholesale and retail trade relied most on state guaranteed loans (25%) followed by manufacturing (18%).

What companies are saying on the pace of the recovery

A survey run between 27 May and 4 June by Banque de France helps assess how fast the economy is recovering since the end of the lockdown. Starting with the industry sector, corporates used 61% of their production capacity in May according to the survey, a nice uptick from April (48%) and compared with 78% before the pandemic. The auto sector is recovering fast at 36% in April vs just 10% in May, Textile and Clothing too at 52% (from 32%), and so is Equipment goods at 44% (from 63%). Regarding construction, respondents said the level of activity in April is 66% what is considered the normal level. This compares with 25% in March and expectation is to reach 85% as early as in June. In the service industry, respondents said the level of activity in April is 61% (vs 50% in April) and expected to reach 73% at the end of June

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